Any move to stop water companies from paying dividends due to sewage dumping would be catastrophic for the sector, industry bosses have warned.
Environment secretary Steve Barclay mooted the idea of a dividend ban last month alongside a proposal to cap bonuses of bosses of the utilities that breach spill guidelines.
New powers handed to the regulator next year will include the right to a “cash lock-up” depending on the severity of any spillage, unnamed sources told Bloomberg.
Water company chiefs, though, have responded that capping dividends would have a detrimental impact by making it too expensive to raise funds to carry out the work required to improve pipe infrastructure and stop spills in the first place.
Some £1.4 billion was paid out in dividends by the companies in the financial year to April 2023, a payout level that has been questioned by water regulator Ofwat.
Utilities fear regular dividend blocks would render the sector uninvestable.
Sources quoted in the story added if the government also moves to put debt-strapped Thames Water into special administration that would also have a severe impact on investors' confidence in the sector.
Yesterday, Barclay's department announced 500 additional staff would be taken on to boost sewage inspections four-fold.
Shares in utilities Pennon Group PLC (LSE:PNN, OTC:PEGRY) and Severn Trent PLC (LSE:SVT) were today up 0.8% at 675p and 2,569p respectively, while United Utilities Group PLC (LSE:UU.) shed 0.4% to 1,050P.